Satish Kumar More, a figure to look up to bears a charismatic
personality and the zeal of a youth to attain his goals. He is one of the
founding members of Lucky Group and has been playing an integral role in the
group’s diversification towards manufacturing. Apart from Lucky Group he also
serves as the Senior Vice-President of the CNI (Confederation of Nepalese
Industries), a professionally led manufacturing and service sector industry centred
apex body. In addition, he has previously served as the President of Nepal
Foreign Trade Association. A visionary of the Group, he serves as a dedicated
Chairman and is a guidance counsellor.
Lucky Group currently has
following companies under its portfolio:
- Lucky
Nepal Co. (P.) Ltd.
- Lumbini
Vidyut Udyog (P.) Ltd.
- Ganapati
Vanaspati (P.) Ltd.
- Nuplast
Industries (P.) Ltd.
- Shivam
Cement Ltd.
- Hongshi
Shivam Cement (P.) Ltd.
- Asia
Meditech Solutions (P.) Ltd.
- Star
Asia Insurance Brokers (P.) Ltd.
- Teletalk
Pvt. Ltd.
Shivam Cement one of the companies where Lucky Group has its
stake is in the process of going public. This is a milestone for the Nepali
Capital Market. Currently, more than 70% of the market capitalization is
concentrated by the BFIs and the entry of Real sector companies adds
diversification to both the bourse and individual portfolio. In addition, it is
also the first manufacturing company to be issuing IPO at a premium, so the
entire market is impatiently waiting for Shivam to go public.
Could you enlighten us with a
brief history of Shivam Cement?
Shivam cement is the joint
venture established in 2009 by Lucky Group, Goyal Group, Sharda Group and Maru
group with an objective to enter the industry and develop quality products.
When the company was first established the production capacity stood at 750
tons of grinding and 1200 tons of clinker.
Later the group was joined by
Bhimsaria Group and Devanera Group. Today the production capacity stands at
1800 tons of clinker and 3000 tons of cement.
So in the course of time we
have enhanced our capacity and are using the state-of-the-art technology. We
are using German and Denmark based technology for capacity enhancement. Just
last year, roller press using German Technology was introduced for grinding.
Will going public strengthen
the company’s financials and the groups’ as a whole?
This is our main aim here. The
brand image is number one thing for Shivam and we’ve been maintaining our
quality to ISI standard.
Basically it was our dream to
share this brand with the people around the areas of our operation – both mines
and factory affected. So we’ll be issuing 2% shares for the locals of the affected
areas and to them whatever the premium is determined by SEBON we’ll be
proving 20% to 25% discount on it. After that we’ll be issuing 10% for
the general public.
What are your thoughts about
entering the market during this bearish trend?
That’s a very good question,
but it is very difficult to predict what will be the good time to enter the
market. But I don’t think that will create much of a problem. We’ve already
completed the underwriting and other requirements as per SEBON’s rules and regulation.
When can we expect the IPO to
float?
We approached SEBON and
requested them to allow us to float both the IPO for locals and general public
at the same time by publishing the two prospectus too at the same time. However
based on their first comment, they want to give us permission in two stages.
Since we’ll be providing discount to the locals, they suggested that we need to
issue first to the locals and after completion of that the second stage can be
carried forward.
So we’ve agreed that we’ll be
issuing in two stages but we’ve also requested to give the permission at once
so that the entire floatation time can be shortened. We are yet to hear from
SEBON regarding that.
How are you planning to use
the money raised via IPO?
We basically have two plans to
use the money that will be raised from the issuance.
- We
are thinking of expanding Shivam’s production capacity.
- We
are also thinking of lowering the debt in the capital composition by
paying off some of the bank loans.
What is current financial standing
of Shivam Cement?
The regulations of the SEBON
require that the company should be in profit for three consecutive years before
going public. So that automatically clarifies that Shivam is in profit for the
past three years. The other financials are:
- Paid-up
capital: Rs. 387.2 crore
- Net
profit of 3rd quarter of 2074/75: Rs. 90 crore
- Net
profit of FY 2073/74: Rs 81 crore
- Dividend
distributed on 2073/74: 10%
after tax
So from the figures above we
can see that the foundations of Shivam is pretty strong. Also, we can see that
it has earned more net profit in these 9 months than last year’s 12 months,
which shows how well their performance is and this also boosts their net worth.
The paid-up capital stands at
Rs 387.2 crore and will climb by 12% after the IPO issuance, where 2% will go
to locals and 10% to the general public. Similarly, the debt stands
somewhere near Rs 400 crore, so the debt-equity ratio stands somewhere near
50:50.
Similarly, Shivam also
has Tax Benefit. Normally, the tax rate for other entities
range between 20%-30%, but the current tax for Shivam is around 18%. The
corporate tax is 20% but since we have 300+ employees we can enjoy 10% discount
on it. Similarly once we float the shares the tax rate is likely to drop down
to 15% through the benefits provided by SEBON for going public.
Hongshi Shivam Cement - How did this venture came to be between Shivam and
Hongshi to form Hongshi Shivam Cement?
Hongshi Cement is one of the
largest cement producers in China. They have about 35 to 40 industries there
and each has a production capacity of 5000 to 6000 tons of cement.
Hongshi cement wanted to
establish one of their industry in Nepal through joint venture with one of the
local company. They had gone all over the country in search of a partner and
ultimately they chose us.
So on January 2017 we had a
laying stone ceremony and in March 2018 we officially started the production.
We were able to start production in about 15 months from the start date, so
this is a great achievement for us.
With the world getting smaller
and smaller, FDI has gained paramount importance in the nation’s development.
You also have brought Hongshi Cement FDI, how difficult was it?
To be honest, it wasn’t very
difficult. Hongshi cement has a very good reputation in China and Shivam is a
good company of Nepal. Plus we had our contacts in places, which helped in
overcoming some of the bureaucratic hurdles.
The past Honorable Prime Minister,
Dr. Bhattarai had established Investment Board of Nepal (IBN), which would
function as an independent body for large projects who had some level of
autonomy in operation. However, in reality the IBN couldn’t perform in huge
magnitude but it was very helpful to us in establishing Hongshi Shivam.
Similarly, the other ministries were also very helpful.
So I want to recommend the
current government to empower IBN and let it function as an independent body
like it was planned to.
What is Shivam’s stake in it?
The ownership structure of
Hongshi cement is 70:30. The 70% belongs to Hongshi cement and 30% belongs to
Shivam Holdings. From the 30%, 88% belongs to Shivam cement.
Has the production started?
The commercial production of
the plant has started from Jestha 2, 2075 with a capacity to produce 6,000
tons.
Economy
What are the challenges and
opportunities for entrepreneurship in this economy?
Our country is full of
opportunities and for me there are 5 major ones:
- Hydropower
( Hydropower in real terms, not from political influence)
- Mines
Based Industries
- Tourism
- Education
Hub near mountain region
- Agriculture
( but a lot of our manpower is gone for foreign employment, so we’ll need
high-tech machines and modern techniques)
If you ask me about the
challenges, the main challenge is the Decision Time Taking. If this can be
reduced or we can bring reforms in the policies the progress can be fastened.
What are your expectation from
the upcoming budget and the monetary policy?
After two decades, we finally
have a 2/3rd majority government. So finally we can say
that our country is out of the transition phase (sankraman kaal) and the
only only only way ahead is towards economic revolution (aarthik kranti).
This is not just me saying it, I represent Confederation of Nepalese Industries
(CNI) when I say this and along with me we have commitments from our PM Oli, FM
Dr. Khatiwada, Industry Minister Matrika Prasad and other people in higher
positions too. So if this commitment is maintained, we can do something good in
Nepal.
My expectation from the
upcoming budget are:
- Decreasing
the bureaucratic hurdles of the system
- Specific
steps to control trade deficit by promoting import substitution based
industries
- Facilitating
policies to promote and empower Nepali industries like the way the
Environment Impact Assessment (EIA/IEE) policies were relaxed for
Hydropower and cement companies.
What is the impact of
increasing interest rates in your business?
The impact we’re facing is the
same everyone is facing in the economy right now. When we signed the rate was
around 6 or 6.50% but when the time came for actual execution the interest is
twice as high. So if the rising rates can’t be controlled then the NPA (Non-Performing
Asset) will go up too.
However, we have to also look
at some positive changes happening in the industry. Recently, Energy Minister
and NEA made it possible to eliminate load shedding in industries too. So this
has helped the industries to become more competent and efficient.
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